Lending marketplace Funding Circle is getting a lot more money to loan to small businesses. The U.K.-based company will get as much as $420 million to lend over the next three years from Chicago-based Victory Park Capital, the companies announced on Thursday (Feb. 19).
To put that number in perspective, it represents roughly a 50 percent increase over the $850 million in small-business loans that Funding Circle has made since it was launched in 2010. It's also a nearly 20 percent jump beyond the $2.2 billion in loans that Victory Park Capital has funded since 2010.
Under the deal, Victory Park will fund small-business loans in the U.K. and U.S. across all risk bands, according to the Funding Circle platform's credit criteria. Victory Park was an early funder for Funding Circle loans in the U.S., and has also funded $50 million in loans for payday-loan alternative LendUp, as well as AvantCredit, Kreditech and other alternative lenders.
Funding Circle facilitates loans of between $25,000 to $500,000 in the U.S., and between £5,000 and £1 million in the U.K. The companies didn't say what, if any, top-end cap there would be on the Victory Park-funded small business loans. Businesses typically get access to the loan in seven days, instead of the three to five months typical with a bank.
Getting loans continues to be a challenge for small businesses, more than five years after the recession officially bottomed out. While the approval rates for small-business loans from big U.S. banks has crept up steadily over the past year (it's now just above 20 percent), those banks want to make the largest loans possible. At the same time, smaller banks are approving fewer small-business loans, in part because of increasing post-recession capital requirements. That is leaving an increasing gap to be filled by alternative lenders, including marketplaces like Funding Circle, for smaller business loans.